KUALA LUMPUR: Palm oil price is expected to average between RM2,300 and RM2,400 per metric tonne this year driven by the government’s policy to ramp up palm-based biodiesel consumption.
Malaysian Biodiesel Association president UR Unnithan said the push for increasing share of renewables is gaining momentum globally.
“Biodiesel is now an integral and important part of the palm biodiesel mandates. We see there will be an increase mandate for both Malaysia and Indonesia,” he said during presentation on Palm Biodiesel Outlook in 2019 here today.
Unnithan said the increase mandate from both countries would support the crude palm oil price this year.
“Indonesia is projected to increase its mandate from B20 to B30 by next year, giving a gap close to 3 million metric tonne of additional palm-based biodiesel, dependent on how effective their implementation,” he added.
He said Malaysia also plans to increase its mandate from the current B10 to B20 next year which could double the total volume of palm-based biodiesel at about 700,00 to 800,000 tonnes.
“Both Indonesia and Malaysia mandates of palm-based biodiesel would have a significant effect on the total use of palm to reduce inventory,” he said.
Unnithan said the supply of palm oil would continue to increase if the country does not have enough take (consumption) on biodiesel, which in turn would reduce its price.
He added the effect on European Union (EU) ban of palm-based biodiesel would not be materialised until 2020.
“This will encourage exports of palm oil for biodiesel just like last year,” he said.
However, he cautioned that low crude oil prices around US$55 per barrel, record stocks and ample production of oil seeds and palm oil will restrict much higher prices this year.
The government started its expansion of the B7 biodiesel programme for the transport sector to B10 (blend of 10 per cent palm biodiesel and 90 per cent of petroleum diesel) from February 1.
B7 biodiesel will also be introduced for the industrial sector on July 1.
The ministry said the two programmes were expected use up to 761,000 tonnes of palm oil annually, subsequently reducing high stock levels.
The initiative will likely increase palm oil price to RM2,200 per tonne.